# On-Chain Hedging ⎊ Area ⎊ Resource 2

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## What is the Hedging of On-Chain Hedging?

On-chain hedging refers to the practice of mitigating financial risk by executing trades directly on a blockchain using decentralized protocols. This involves taking offsetting positions in derivatives or spot markets to protect against adverse price movements of an underlying asset. It is a crucial strategy for managing portfolio exposure in decentralized finance.

## What is the Strategy of On-Chain Hedging?

Specific on-chain hedging strategies include delta hedging using perpetual swaps or options contracts on decentralized exchanges. Automated algorithms adjust positions in real-time based on market changes. The implementation of these strategies requires careful consideration of transaction costs and network latency.

## What is the Execution of On-Chain Hedging?

The execution process for on-chain hedging involves trades processed and settled transparently on the blockchain. This eliminates counterparty risk associated with off-chain intermediaries. Smart contracts automate the rebalancing of hedge positions, ensuring continuous risk management without manual intervention.


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## [Delta Hedging Transparency](https://term.greeks.live/term/delta-hedging-transparency/)

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**Original URL:** https://term.greeks.live/area/on-chain-hedging/resource/2/